<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year ended March 31, l996.
Commission File Number 0-26182
INTERNATIONAL IMAGING, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3469649
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Eseco Road, Cushing, Oklahoma 74023
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(918) 225-1266
- ---------------------------------------------------
(Registrant's telephone number, including area code)
Name of each exchange on which registered None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.0012 per share
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes No X
---- ----
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB.
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(Cover page continued on next page)
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Registrant's revenues for its most recent fiscal year: $ 3,557,627
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days: As of May 29, 1996 $ 1,760,831
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of May 29, 1996, 4,733,416
shares of common stock.
No documents are incorporated by reference except those Exhibits so incorporated
as set forth in the Exhibit index.
Transition Small Business Disclosure Format (Check one)
Yes No X
---- ----
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INTERNATIONAL IMAGING, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
PART I
<C> <S> <C>
Item 1. Description of Business
General 4
Marketing and competition 4
Consolidated strategy 5
Operations 5
Item 2. Description of Properties 6
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 6
PART II
Item 5. Market for Common Equity and Related Stockholder Matters 7
Item 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
Item 7. Financial Statements 9
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 23
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act 23
Item 10. Executive Compensation 23
Item 11. Security Ownership of Certain Beneficial Owners and
Management 24
Item 12. Certain Relationships and Related Transactions 24
Item 13. Exhibits and Reports on Form 8-K 24
SIGNATURES 25
</TABLE>
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Part I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL:
International Imaging Inc. ("IMGI" or the "Company") is a manufacturer
and distributor of equipment for the specialty photographic laboratory market.
IMGI entered this market when it merged with Electronic Systems Engineering Co.
("ESECO") on July 27, 1994. IMGI also imports and markets a full line of film
and paper processors under its Speedmaster(R) label; IMGI also manufactures
photographic process instrumentation, including densitometers, color analyzers,
darkroom doors, computer controlled image enlargers and roll paper production
transport systems. In addition, some of the Company's equipment is used for
nondestructive testing in other industries such as brewing and x-ray processing.
Through its subsidiary, ESECO, the Company has over a 25 year presence
in the photographic industry through its specialization in the electronic photo
instrumentation and color analyzer markets. In 1987, ESECO introduced automated
continuous process imaging enlargers and has since established itself as a
worldwide leader in this enlarger market.
Prior to the merger with ESECO, the Company, under the name J&E Beauty
Supply Inc. ("J&E"), operated as a cosmetic and beauty supply distributor at
both the retail and wholesale levels. These operations were never profitable and
J&E reported an accumulated deficit of approximately $267,001 from inception
through July 27, 1994. J&E divested itself of this line of business shortly
after it merged with ESECO. As a result of this divestiture, the Company has
chosen to treat the merger with ESECO as a recapitalization, thus the financial
statements presented are as of March 31, the fiscal year end of ESECO (See
footnote 1 to the Consolidated Financial Statements). The financial statements
presented reflect the historical operating results of ESECO through July 27,
1994, and the results of the combined companies from the date of the merger
transaction, July 27, 1994 through March 31, 1996. Pro forma information is not
presented since the combination is not considered a business combination.
After the merger with ESECO, before each of them resigned, the
management and directors of J&E elected Arthur Kaminshine, President of ESECO,
as President and sole director of the Company and new officers were elected. The
offices of the Company were then moved to the offices of ESECO in Cushing,
Oklahoma.
Prior to the merger, ESECO entered into a distribution agreement with
Colenta Labortechnik, GmbH and ART Processor-Technik, GmbH (collectively
"Colenta") on April 7, 1994 to distribute that company's line of photographic
paper and film processors in the United States, Canada, and Mexico. ESECO agreed
with Colenta to distribute their products to the remainder of the Western
Hemisphere. ESECO added the processor lines so that it could provide its
customers with a full line of photographic equipment for the laboratory.
MARKETING AND COMPETITION:
The Company distributes its product lines both through dealers and
direct sales. Prior to January 1, 1996 approximately 60% of its sales were
through dealers or other manufacturers, while approximately 40% of its sales
were made directly to the end-user. On January 1, 1996, the Company changed its
distribution method as described below.
In the Western Hemisphere, IMGI has four primary product lines;
enlargers, photo instrumentation devices, processors, and darkroom doors. Prior
to January 1, 1996, the Company had contracts with thirteen select dealers in
the United States and two in Canada that are authorized to handle the entire
product line. On that date, all but one of the dealers' distribution agreements
with ESECO were terminated or modified. At the same time, the Company added nine
commission representatives and one employee manager to the marketing department
to provide more intensive and focused distribution efforts. The Company also has
contracts with a number of other dealers and catalog sales companies who may
sell part of the product line; however, they do not have the required technical
training to sell the more sophisticated equipment the Company produces.
IMGI is primarily represented in the Eastern Hemisphere by subsidiaries
of the Eastman Kodak Co. and the ART Colenta Group, although it sells products
in Japan and China through established representatives or by direct sales. The
Company also
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supplies equipment to other manufacturers, including some manufacturers that
compete with IMGI, that is either sold under such manufacturers' respective
labels or is incorporated into their manufactured equipment.
The overall photographic market is mature with projected growth of
three to five per cent per year. Management believes IMGI operates in a niche of
that market by providing a more efficient and faster way to process photographic
products. The Company's management believe that this part of the market, while
relatively small, will experience greater growth than the overall photographic
market.
There are several major suppliers of enlargers both in the United
States and in foreign countries. The Company believes that its enlargers are
more technologically advanced and operate more automatically than all but two
competitors. The Company's products also enjoy a price advantage against these
competitors because of the devaluation of the dollar.
Management believes the Company is the second largest manufacturer of
photo instrumentation devices in the United States, providing a family of very
sensitive, reliable devices. The basic application technology of the photo
instrumentation is currently being modified to be a color-sensing device in
other applications.
There are currently two manufacturers of processor lines in the United
States. The Company believes that it can compete successfully with each them due
to superior technology and customer support with the imported processors from
Colenta in Germany.
There is one other manufacturer of revolving darkroom doors in the
United States. It primarily manufactures metal doors, whereas the Company
manufactures doors using plastic components, which currently places the Company
at a cost disadvantage. In addition, the Company has sold some darkroom doors in
Europe, but expensive shipping costs limit such sales. Some of the Company's
equipment is used for non-destructive testing in other areas such as radiation
monitoring and brewing, but these are not major segments of the business at this
time.
The Company engages in an aggressive advertising campaign relative to
its size to create name recognition and a quality image. The Company does not
depend on any one or even a few major customers for its sales. In addition, no
individual customer accounts for more than 5% of total sales although management
expects various subsidiaries of the Eastman Kodak Company will account for
approximately 15% of sales in total.
CONSOLIDATED STRATEGY:
IMGI plans to build on its reputation for advanced engineering and
responsiveness to customer needs to expand the processor segment of its market
in the United States. By expanding the variety of products and related technical
services available to its customers, IMGI should be able to increase market
penetration. The Company also plans to add compatible product lines to further
utilize its field sales force. This in turn should lead to greater market share
and increased profit margins.
The Company is also re-designing some of its products for Third World
markets. IMGI is in the process of entering these markets in association with
Colenta. By removing some of the more sophisticated electronics from its
products, the Company's products will be more compatible with the maintenance
capabilities of many developing countries.
EMPLOYMENT:
As of March 31, 1996, the Company employed 55 individuals, all of whom
resided in the United States. In addition to two field sales employees, the
Company had contracts with eight independent sales representatives.
WARRANTIES:
ESECO warrants its Speedmaster(TM) processors for one year on parts and
90 days on labor, while its Speedmaster(TM) and Speedmatic(TM) darkroom doors
and roll easels each carry a one year warranty on both parts and labor when
returned to the plant in Cushing. Compucolor(TM) and Compumatic(TM) enlargers
carry a thirty month warranty on both parts and labor when returned to the plant
in Cushing.
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MANUFACTURING:
IMGI manufactures or distributes its product lines from its plant in
Cushing, Oklahoma. The Company also manufactures most of the electronic
assemblies used in its products. Metal stampings and fabrication are also
performed on site; however, die casting and plastic extrusions are subcontracted
to other manufacturers.
Processors are imported from Colenta in Germany and held for
distribution at the plant; all other products are assembled and held for
distribution or assembled to order at the plant. Dependence on outside sources
for castings and other components may cause delays during periods of strong
demand; nevertheless, the Company believes this method of production is the most
cost effective approach at this time.
RESEARCH AND DEVELOPMENT
The Company maintains an engineering staff of five professionals to
develop new products and applications for existing products. This department is
currently developing a digital imaging enlarger and smaller, portable photo
instrumentation devices as well as ultra-sensitive photo instrumentation and
dosimetry devices. The total amount of research and development expenses during
the fiscal year did not exceed 5% of total sales.
PATENTS AND COPYRIGHTS
The Company holds patents on various of its easels and masks and pays
royalties to the inventors of various other devices, including some of the
enlarger heads. The Company has also registered various of its trademarks, has
vigorously defended them in the past, and plans to continue to engage in such
defense in the future. The Company has a patent application pending on the
digital imaging device.
GOVERNMENT APPROVAL AND REGULATION
No business activities of the Company are subject to regulation by any
federal, state or local governmental agency. In addition, no governmental
approvals of new or existing products are required. Finally, the Company does
not use any unusual or hazardous chemicals in its operations.
ITEM 2. DESCRIPTION OF PROPERTIES
The Company's headquarters is presently located at One Eseco Road,
Cushing, Oklahoma 74023, at the office of its President. The Company owns its
headquarters as well as its manufacturing facilities, which are also located in
Cushing, Oklahoma. The premises contain approximately 44,000 square feet, of
which approximately 75% is used for manufacturing with the balance being used
for administrative, marketing, and engineering functions. The Company does not
own or lease any other facilities at this time.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material pending legal proceedings
other than ordinary routine litigation incidental to the business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is listed on the NASDAQ Bulletin Board under
the symbol "IMGI". On March 31, 1996 there were approximately 219 shareholders
of record of the Common Stock of the Company, based on information provided by
the Company's transfer agent.
The following table sets forth the high and low bid prices for the
Company's Common Stock, as reported on NASDAQ, for the quarters presented. The
bid prices represent inter-dealer quotations, without adjustments for retail
mark-ups, mark-downs or commissions and may not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
Bid prices
Fiscal 1996 High Low
----------- ---- ----------
<S> <C> <C> <C>
First quarter 4/1/95-6/30/95 $1.5800-2.3750 $1.3750-2.1250
Second quarter 7/1/95-9/30/95 $0.7500-1.7500 $0.5625-0.6250
Third quarter 10/1/95-12/31/95 $0.6100-0.9375 $0.5000-0.5625
Fourth quarter 1/1/96-3/31/96 $0.8125-0.8125 $0.6250-0.6250
</TABLE>
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the
Company's Consolidated Financial Statements at Item 7 herein.
RESULTS OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 1996 AS COMPARED TO THE YEAR
ENDED MARCH 31, 1995
After the merger with ESECO, the corporate name was changed to reflect
the change in business direction and the international nature of the business.
As set forth in Form 8-K/A filed October 10, 1994, ESECO's primary assets at the
time of the merger on July 27, 1994 consisted of production line machinery,
equipment and a manufacturing facility.
Sales for fiscal year ended March 31, 1996 amounted to $3,557,627, an
increase of $514,521 or 16.9% over fiscal 1995. Increased processor sales
accounted for $585,983 of this amount. Other product lines were approximately
level compared to the prior fiscal year.
Cost of goods sold increased 19.9%. to $2,684,356 from the previous
year. The net increase in sales and cost of goods sold resulted in a $68,587
increase in gross profit. The resulting gross profit margin was 24.5% of sales,
down from 26.4% in the previous fiscal year. This deterioration in gross profit
resulted from the introduction of the processor line of equipment which is less
profitable than equipment manufactured by the Company.
Operating expenses decreased 35.7% to $1,537,979 for the 1996 fiscal
year. The largest component of this decrease was a non-cash restructuring charge
of $841,677 recorded in September 1994 which did not occur in fiscal year 1996.
If that charge had not been recorded in the fiscal year ended March 31, 1995,
operating expenses in the current fiscal year would have been only $13,503 less
than the prior year.
Interest expense increased 49.1% in the fiscal year 1996 because the
cash made available from the exercise of stock options was down significantly
from the prior year, thereby creating the need to borrow funds. Other income
(expense), net included an adjustment for the permanent decline in the market
value of investments held by the Company in fiscal year 1995 which did not occur
in fiscal 1996, thus resulting in a reduction of $106,109 in this account for
the year.
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TRENDS
As discussed in Item 1 above, on April 7, 1994, prior to its merger
with IMGI, ESECO entered into an agreement with Colenta to distribute, on an
exclusive basis, the Colenta line of automatic photographic film and paper
processors in the U.S. and Canada under ESECO's Speedmaster(TM) label. ESECO
also granted Colenta the limited right to distribute the ESECO product line in
the Eastern Hemisphere. The processors have a higher relative cost of sales
compared to enlargers; therefore, as expected, the cost of sales as a percentage
of sales increased from the level in the prior fiscal year. In early fiscal year
1996, actual sales volume was somewhat less than the Company planned due to
supply problems. The lower gross profit margins, coupled with smaller than
expected deliveries, resulted in a significant loss from operations during
fiscal 1996. However, the fiscal 1996 loss was less than the loss in the
previous year and management expects this trend to continue as processor sales
increase. Certain relatively fixed expenses involved in distributing processors
are not expected to increase as sales volume increases.
The Company plans to increase and maintain a higher level of processor
inventory than is currently on hand which will require additional working
capital to support the inventory. The costs involved in introducing the
processor line and the unexpectedly low sales volume of the processor line are
expected to be overcome to some extent during the 1997 fiscal year because of
increased production capabilities by Colenta's opening of a new facility in
Austria for some of the processor lines. In addition, the Company's technicians
and sales personnel are now better trained and more knowledgeable about the
unique features of these processors which should eliminate the need for training
trips to Germany.
The Company anticipates that by mid-fiscal year 1997, nearly one-half
of its sales volume will consist of processors imported from Germany. These
machines are priced in U.S. dollars, but the continued weakness of the U.S.
dollar relative to the Deutsche Mark ("DM") has resulted in higher costs to the
Company because it absorbs all exchange rate declines below 1.50 DM to the U.S.
dollar under an agreement entered into April 1, 1995. This agreement calls for
the Company to adjust its payments to Colenta so that Colenta will not receive
less than 1.50 DM to the U.S. dollar on purchases from Colenta by the Company.
This same agreement sets a ceiling of 1.67 DM to the dollar so that if the
dollar should strengthen against the Deutsche Mark, the Company will enjoy a
benefit should the exchange rate exceed 1.67 Marks. Exchange rates have been
below that level since prior to April 1, 1995. On January 31, 1996 the exchange
rate was 1.4983 DM to the United States dollar. The cost of this agreement has
not been material to the Company.
The Company is developing new products and modifications of existing
products to market through established channels. The Company is also exploring
other distribution channels for existing products or modifications of existing
products.
CAPITAL RESOURCES AND LIQUIDITY
The Company incurred losses of $2,510,667 during the two fiscal years
presented. These losses included special non-cash charges of $841,677 (see Note
3 to the Consolidated Financial Statements) resulting from management's plan to
revise its product line and normal operating losses related primarily to the
introduction of the photographic processor line and the increased overhead in
administrative, accounting and legal expenses, incurred as a result of operating
as a public company. The Company has funded these losses through the sale of
stock in the amount of $1,666,763 and bank and related party borrowings of
$1,025,503. As reflected in the consolidated statements of cash flows, cash has
decreased $332,840 from April 1, 1994 to March 31, 1996, while inventory has
increased by $843,860 during the same period. The Company's management
anticipates that it should return to profitability during fiscal year 1998
because of new products, reduction of overhead costs primarily achieved through
voluntary reductions of various management salaries, restructuring of the
Company's distribution methods effective January 1,1996, focusing on direct
sales and significantly reducing commissions to dealers, and the availability of
processors for sale.
On July 25, 1994 the Company granted options to various officers,
directors, employees, and consultants for 1,000,000 shares of common stock at
$2.00 per share with a total of 619,333 of those options being exercised. Not
all of the remaining 380,667 options are expected to be exercised prior to their
expiration on July 25, 1997 because the Company's common stock is trading at a
significantly lower price than the option price.
Current working capital is sufficient to sustain operations at current
levels, but additional capital will be required to sustain an expected increased
level of operations. Management plans to obtain the necessary working capital
either through the sale of stock
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or debt financing, as required. The Company obtained a Small Business
Administration guarantee of bank loans based on and secured by certain
percentages of foreign accounts receivable for up to $1,000,000 in January 1996.
There are currently no material commitments for capital expenditures.
CONTINUING OPERATIONS
The Company discontinued its beauty supply operations around the same
time as the merger with ESECO . All costs and liabilities relating to that
activity have been disposed of. The lease commitments and other liabilities were
assumed by the transferee of the operations. Continuing operations will include
photography equipment and the related markets in which ESECO has been engaged
for over 25 years.
SEASONALITY
The Company is not aware of any seasonal factors affecting its business
although the sale of darkroom doors tends to be slower in the fourth calendar
quarter of the year.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of International Imaging, Inc.
and Subsidiaries, together with the reports thereon of Arthur Andersen LLP dated
May 17, 1996 are set forth on pages 10 through 22 hereof, which immediately
follows this page.
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of
International Imaging, Inc.:
We have audited the consolidated balance sheet of International Imaging, Inc. (a
Delaware corporation), formerly J & E Beauty Supply Inc. and subsidiaries as of
March 31, 1996, and the related consolidated statements of operations,
stockholders' equity and cash flows for the years ended March 31, 1996 and 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of International Imaging, Inc. and
subsidiaries as of March 31, 1996, and the results of their operations and their
cash flows for the years ended March 31, 1996, and in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma,
May 17, 1996
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INTERNATIONAL IMAGING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
<TABLE>
<CAPTION>
<S> <C>
CURRENT ASSETS:
Cash $ 12,790
Short-term investments 18,191
Accounts receivable, net of allowance for doubtful accounts
of $73,404 489,820
Inventories 1,608,226
Other current assets 19,203
----------
Total current assets 2,148,230
----------
PROPERTY AND EQUIPMENT:
Building 663,848
Furniture, fixtures and equipment 520,701
Land 12,560
----------
Total property and equipment 1,197,109
Less: Accumulated depreciation 651,335
----------
Net property and equipment 545,774
OTHER NONCURRENT ASSETS, net of amortization 11,324
----------
Total assets $2,705,328
==========
</TABLE>
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INTERNATIONAL IMAGING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
<TABLE>
<CAPTION>
<S> <C>
CURRENT LIABILITIES:
Accounts payable $ 667,751
Accrued liabilities 165,228
Deferred compensation 20,000
Short-term advances - related parties 205,030
Current portion of long-term debt 27,471
-----------
Total current liabilities 1,085,480
---------
NONCURRENT LIABILITIES:
Long-term debt, net of current portion 1,032,512
Deferred compensation 60,112
-----------
Total noncurrent liabilities 1,092,624
-----------
STOCKHOLDERS' EQUITY:
Common stock, par value $0.0012; authorized 300,000,000 shares;
issued and outstanding 4,733,416 shares 5,680
Additional paid-in capital 2,615,540
Retained earnings (deficit) (2,093,996)
-----------
Total stockholders' equity 527,224
-----------
Total liabilities and stockholders' equity $ 2,705,328
===========
</TABLE>
The accompanying notes are an integral part of this consolidated balance sheet.
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INTERNATIONAL IMAGING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
SALES $ 3,557,627 $ 3,043,106
COST OF SALES 2,684,356 2,238,422
----------- -----------
GROSS PROFIT 873,271 804,684
----------- -----------
OPERATING EXPENSES:
Selling and administrative 1,537,979 1,551,482
Special charges (Note 3) -- 841,677
----------- -----------
1,537,979 2,393,159
----------- -----------
OPERATING LOSS (664,708) (1,588,475)
----------- -----------
INTEREST AND OTHER INCOME (EXPENSE):
Interest income 36,631 18,758
Interest expense (90,041) (60,381)
Other income (expense), net (28,171) (134,280)
----------- -----------
(81,581) (175,903)
----------- -----------
NET LOSS $ (746,289) $(1,764,378)
=========== ===========
NET LOSS PER WEIGHTED AVERAGE SHARE OF
COMMON STOCK $ (0.16) $ (0.53)
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 4,728,139 3,310,086
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
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INTERNATIONAL IMAGING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
Common Stock Additional Retained
----------------------- Paid-in Earnings
Shares Amount Capital (Deficit) Total
---------- ---------- ------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, March 31, 1994 677,764 $ 67,777 $ 886,680 $ 416,671 $ 1,371,128
Issuance of common stock 322,236 32,223 395,874 -- 428,097
Recapitalization (Note 1) 3,114,083 (95,063) 95,063 -- --
Exercise of stock options 575,583 691 1,150,475 -- 1,151,166
Net loss -- -- -- (1,764,378) (1,764,378)
----------- ----------- ----------- ----------- -----------
BALANCE, March 31, 1995 4,689,666 5,628 2,528,092 (1,347,707) 1,186,013
Exercise of stock options 43,750 52 87,448 -- 87,500
Net loss -- -- -- (746,289) (746,289)
----------- ----------- ----------- ----------- -----------
BALANCE, March 31, 1996 4,733,416 $ 5,680 $ 2,615,540 $(2,093,996) $ 527,224
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
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INTERNATIONAL IMAGING, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (746,289) $(1,764,378)
Adjustments to reconcile net loss to net cash used in operating
activities-
Special charges -- 841,677
Depreciation and amortization 83,340 101,026
Gain on sales of property, equipment and investments (6,057) (43,294)
Unrealized loss on investments -- 172,692
Deferred compensation (16,840) (17,433)
Changes in current assets and liabilities-
Increase in accounts receivable (11,835) (156,374)
Increase in inventories (337,612) (506,248)
Decrease in other assets 13,091 67,956
Increase in accounts payable 299,935 210,367
Increase (decrease) in accrued liabilities 12,778 (308,911)
Other (59) (629)
----------- -----------
Net cash used in operating activities (709,548) (1,403,549)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (105,274) (318,250)
Purchase of short-term investments (3,124) (176,633)
Proceeds from sales of property and equipment 11,519 46,407
Proceeds from sale of investments -- 53,125
----------- -----------
Net cash used in investing activities (96,879) (395,351)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of stock 87,500 1,579,263
Proceeds from the issuance of debt and related party advances 875,503 150,000
Repayment of debt (195,434) (224,145)
----------- -----------
Net cash provided by financing activities 767,569 1,505,118
----------- -----------
NET DECREASE IN CASH (38,858) (293,982)
CASH, beginning of year 51,648 345,430
----------- -----------
CASH, end of year $ 12,790 $ 51,648
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during period for-
Interest $ 84,387 $ 51,742
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
15
<PAGE> 16
INTERNATIONAL IMAGING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
1. COMPANY INFORMATION:
International Imaging, Inc. (the "Company") is a manufacturer and distributor of
equipment for the specialty photographic laboratory market. International
Imaging entered this market when it merged with Electronic Systems Engineering
Co. ("ESECO") on July 27, 1994.
Prior to the combination with ESECO, the Company, under the name J & E Beauty
Supply Inc. ("J & E"), operated as a cosmetic and beauty supply distributor at
both the retail and wholesale levels. These operations were never profitable and
J & E reported an accumulated deficit of approximately $267,700 from these
operations from inception through July 27, 1994. J & E divested itself of this
line of business shortly after the merger and the net assets of J & E were
distributed to one of the principals of J & E who was involved in arranging the
merger.
For financial reporting purposes, the merger transaction was treated as a
recapitalization in which the transaction was accounted for as an issuance of
ESECO's common stock in exchange for the public shell. The financial statements
presented reflect the historical operating results of ESECO through July 27,
1994, and the results of the combined companies from the date of the merger. Pro
forma information is not presented since the combination is not considered a
business combination.
The Company has incurred losses of $2,510,667 during the prior two fiscal years.
These losses included special non-cash charges of $841,677 (see Note 3)
resulting from management's plan to revise its product line and normal operating
losses related primarily to the introduction of the photographic processor line
and the increased overhead in administrative, accounting and legal expenses,
incurred as a result of operating as a public company. Also, the Company
experienced some supply problems in obtaining processors to sell during fiscal
year 1995 and the early part of fiscal year 1996. The Company has funded these
losses through the sale of stock in the amount of $1,666,763 and bank and
related party borrowings of $1,025,503. As reflected in the consolidated
statements of cash flows, cash has decreased $332,840 from April 1, 1994 to
March 31, 1996, while inventory has increased by $843,860 during the same
period. Management anticipates the Company will return to profitability during
fiscal 1998, as a result of a number of changes that have been put in place
since January 1, 1996. Such changes include introduction of new products,
voluntary management salary reductions, changing the way the Company distributes
its products, and the increased availability of processors for sale.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
The accompanying consolidated financial statements include the accounts of the
Company, ESECO (a wholly owned subsidiary), and ESECO International Corporation
(a wholly owned inactive corporation formed in fiscal 1982). All significant
intercompany accounts and transactions have been eliminated in the accompanying
consolidated financial statements.
Short-term Investments
Short-term investments, which consist of equity securities, are stated at fair
market value based on quoted market prices, as available. Unrealized losses on
current marketable securities are reported as a net amount in stockholders'
equity net of related income taxes until realized. Unrealized losses believed to
reflect a permanent decline in value and realized gains or losses are determined
on the specific identification method and are reflected in other income
(expense), net in the accompanying consolidated statement of operations.
16
<PAGE> 17
Property and Equipment
Property and equipment is recorded at cost. Normal maintenance and repairs are
expensed as incurred. Upon the sale or retirement of depreciable properties, the
costs and related accumulated depreciation are removed from the accounts and the
resulting gain or loss is reflected in other income (expense), net.
Depreciation of property and equipment is computed on the straight-line method
over estimated useful lives. Depreciation of property and equipment used in the
manufacture of goods for sale was $65,786 and $85,594 for the years ended March
31, 1996 and 1995, respectively, and is included in cost of sales in the
accompanying consolidated statements of operations.
Estimated useful lives, in years, are as follows:
Building and improvements 10 - 40
Equipment and tools 5 - 10
Office furniture and equipment 5 - 10
Rental and demonstration equipment 10
Automobiles 5
Income Taxes
Deferred income taxes reflect the estimated future tax effects of differences
between financial statement and tax bases of assets and liabilities at year-end.
Earnings Per Share and Shares Outstanding
Earnings per share of common stock are based upon the weighted average number of
shares outstanding during the year.
Financial Instruments
The Company values its financial instruments as required by SFAS No. 107,
"Disclosures About Fair Values of Financial Instruments." Unless otherwise
noted, the carrying value of the Company's financial instruments approximates
the fair market value.
Use of Estimates
The preparation of these financial statements in conformity with generally
accepted principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Statements of Cash Flows
For purposes of reporting cash flows, cash includes cash on hand and highly
liquid cash investments with a maturity of three months or less.
17
<PAGE> 18
Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," effective for years beginning after December 15, 1995. This
statement requires long-lived assets and certain identifiable intangibles be
reviewed for impairment whenever events or changes in circumstances indicate the
carrying amount of an asset may not be recoverable. Management has not assessed
the impact of this new accounting statement and plans to adopt the provisions in
1997.
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation." This statement defines a revised
method of accounting for an employee stock option or similar equity instruments
and requires an entity to either adopt the revised accounting method or present
pro forma disclosures as if the new accounting method had been applied. The
Company has not assessed the impact of this new accounting statement and plans
to adopt SFAS No. 123 during fiscal 1997.
3. SPECIAL CHARGES:
During fiscal year 1995, ESECO recognized special, nonrecurring pretax charges
of $841,677. These charges arose as a result of management's plan to revise its
product line. The special charges included reserves for obsolete inventory of
$614,720, and a writedown of certain manufacturing and demonstration equipment
of $226,957.
4. INVENTORIES:
Inventories are stated at the lower of first-in, first-out cost or market and
consisted of the following as of March 31, 1996:
Finished goods $ 565,512
Work-in-process 504,860
Parts and supplies 537,854
-----------
$1,608,226
==========
Provisions have been made to reduce excess and obsolete inventories to net
realizable values.
5. SHORT-TERM ADVANCES:
At March 31, 1996, the Company had outstanding cash advances from related
parties of $205,030 primarily used to meet fiscal year 1996 operating cash flow
needs. The repayment terms of the advances made are not defined and thus have
been reflected as current liabilities as repayment could be demanded by the
respective parties. The advances are noninterest bearing.
18
<PAGE> 19
6. LONG-TERM DEBT:
Long-term debt consisted of the following as of March 31, 1996:
<TABLE>
<CAPTION>
<S> <C>
Line of credit to a bank with interest at 2% over National prime (10.25%
at March 31, 1996), adjusted annually, accrued interest due monthly
with unpaid principal and accrued interest due upon maturity at July
1997 $ 500,000
Note payable to a bank, with interest at 10.25%, accrued interest due
monthly with unpaid principal and accrued interest due upon
maturity at October 1997
388,510
Note payable to a bank, due in monthly installments of $2,500, including
interest, at 10.25%, to June 2001 150,000
Note payable to a bank, due in monthly installments of $617, including interest
at 6.9%, to December 1997 12,131
Note payable to a bank, due in monthly installments of $1,028, including
interest at 8.5%, to January 1997 9,342
-----------
1,059,983
Less- Current portion of long-term debt 27,471
-----------
$ 1,032,512
===========
</TABLE>
The line of credit agreement allows the Company to borrow amounts based on
certain percentages of its inventories and receivable balances, as defined.
On January 12, 1996, the Company entered into an agreement with the Small
Business Administration ("SBA") which allows the Company to borrow up to
$1,000,000 based on certain percentages of its foreign receivable balances, as
defined. Amounts outstanding bear interest at 2.5% above Wall Street Journal
prime rates. At March 31, 1996, no amounts were outstanding under this
agreement.
Borrowings under substantially all of the notes payable, the line of credit
agreement, and the SBA loan are personally guaranteed by the president of the
Company.
In March 1996, the Board of Directors approved an agreement between
International Imaging, Inc. and the president of the Company to place in escrow
all of the voting stock of ESECO, the Company's operating subsidiary, in
exchange for personal guarantees by the president of approximately $2,000,000 of
the Company's debt obligations. The stock of ESECO will be held in escrow until
the Company's obligations under the debt agreements are repaid in full. While in
escrow, the president individually has voting power of the stock. The escrowed
shares will be delivered to International Imaging, Inc. upon payment in full of
the notes and release of the president from his personal guarantees within three
years of the escrow agreement. If the notes are not paid within three years, the
ESECO shares, along with any accompanying stock powers will be released to the
president.
19
<PAGE> 20
Maturities of long-term debt and lease financing obligations for years
subsequent to March 31, 1996, are as follows:
1997 $ 27,471
1998 910,415
1999 18,330
2000 20,300
2001 and thereafter 83,467
-----------
$ 1,059,983
===========
7. EMPLOYEE BONUS PLAN:
The Company has an arrangement with its president which calls for an annual
bonus of 5%, 7.5% or 10% of ESECO's income before bonuses and provision for
income taxes based upon specified relationships between income and sales.
Additionally, bonuses are paid to certain other employees based on net sales and
income before bonuses and provision for income taxes. At March 31, 1996, accrued
bonuses for fiscal year 1996 and accrued but unpaid bonuses for years prior to
fiscal year 1996, totaling approximately $92,000 were included in accrued
liabilities in the accompanying consolidated balance sheet.
8. DEFERRED COMPENSATION:
ESECO entered into a deferred compensation agreement with an officer of ESECO
whereby all bonuses due him are payable in installments, including interest,
upon his reaching retirement age in 1982. Deferred compensation payments are
being made at $1,667 per month. The current and noncurrent portions of the
payments due under this agreement and the related accrued interest have been
reflected as deferred compensation in the accompanying consolidated balance
sheet.
9. INCOME TAXES:
SFAS No. 109 requires that a valuation allowance be recorded against tax assets
which are not likely to be realized. The Company's net tax operating loss
carryforwards totaling approximately $890,000 expire at specific future dates
and utilization of certain carryforwards is limited to specific amounts each
year. However, due to past performance and the expiration dates, the ultimate
realization of such tax benefits is uncertain. The Company has established a
valuation allowance against the total amount of these carryforward benefits and
will recognize the benefits only as reassessment demonstrates they are more
likely than not to be realizable. Realization is primarily dependent upon future
earnings in specific tax jurisdictions. While the need for this valuation
allowance is subject to periodic review, if the allowance is reduced, the tax
benefits of the carryforwards will be recorded in future operations as a
reduction of the Company's income tax expense.
10. RELATED PARTY TRANSACTIONS:
The short-term investments held by the Company consist primarily of preferred
and common stock of Reconversion Technologies, Inc. The Company's general
counsel is also the chief executive officer of Reconversion Technologies, Inc.
During fiscal year 1995, Reconversion Technologies, Inc. lost a significant
patent infringement case which caused the quoted market value of the common
stock to substantially decline. The Company believes that although the preferred
stock is not publicly traded, its value has also suffered a similar decline. In
addition, the Company believes the decline in market value is a permanent
impairment in value and have therefore recognized a loss of approximately
$173,000 which is included in 1995 other income (expense), net in the
accompanying statements of operations.
In July 1994, the Company issued 86,487 shares of ESECO stock to a related party
of the Company's general counsel for $86,487.
20
<PAGE> 21
11. EMPLOYMENT AGREEMENTS:
Effective July 1, 1994, ESECO entered into five year employment agreements with
eleven key employees. Such agreements provide for minimum salary levels,
adjusted annually for cost-of-living changes, as well as a lump-sum payment
equal to 300% of the total compensation if the employee is terminated other than
for cause, as defined. The annual salaries for these employees at March 31,
1996, was approximately $391,000
12. COMMON STOCK:
Common Stock Issuances
In fiscal year 1995, ESECO sold 235,749 shares of stock at $1.45 per share prior
to the merger for $341,610. Additionally, ESECO issued 86,487 shares of stock as
repayment of an advance to the Company for $86,487, or $1.00 per share. (See
Note 10).
Shares issued during the fiscal years 1996 and 1995, under the stock option plan
described in Note 13 totaled 43,750 shares and 575,583 shares, respectively, at
$2.00 per share.
In addition to the shares issued as described above, 37,500 shares of the
Company's common stock under the stock option plan described in Note 13 was
issued in error to an unrelated party during fiscal year 1996. Management of the
Company has requested the stock be returned or payment made for the shares
issued. A receivable related to this stock has not been recorded and the stock
has not been considered as issued or outstanding at March 31, 1996.
Warrants Outstanding
At March 31, 1996, the Company had redeemable, transferable warrants outstanding
to purchase 728,332 shares of common stock of the Company. The warrants are
exercisable at $6.00 per share through February 3, 1999, unless redeemed earlier
by the Company. The Company has the right to redeem these warrants at $0.0012
per warrant upon 30 days written notice.
In addition to the warrants above, the Company also has non-redeemable,
transferable warrants outstanding to purchase 36,417 shares of the Company's
stock at $0.72 per share and 72,834 shares at $6.00 per share through February
3, 1999.
During fiscal year 1996, the Company issued warrants to purchase 2,050,500
shares of common stock to the president of the Company for personal guarantees
he has made of the Company's debt obligations. The warrants are exercisable in
whole or in part solely at the option of the holder through December 31, 2005.
The exercise price is $0.50 per share, with provisions for a downward per share
adjustment for certain events defined in the agreement. No compensation related
to these warrants has been recorded by the Company. The common shares underlying
the warrants are shares restricted from trading on the public market. In
addition, at the date of issuance, the public shares were very thinly traded and
management of the Company believes the market quotes on the date of grant would
not be reflective of the market price for this volume of stock trading. In April
1996, warrants for an additional 45,000 shares of common stock were issued to
the president of the Company under the terms and conditions described above.
21
<PAGE> 22
13. STOCK OPTION PLAN:
Effective June 1, 1994, the Board of Directors adopted a stock option plan under
which options to purchase up to 24,000,000 shares of common stock may be granted
to key employees or consultants of the Company. The Plan provides that the
option price may not be less than 85% of the then current market price without
approval of the Company's Board of Directors and that each option shall be made
exercisable as prescribed by the Company's Option Committee. No options may be
granted under the Plan after December 31, 1995.
In July 1994, options to purchase 1,000,000 shares of the Company's stock for
$2.00 per share were granted. Options exercised during fiscal years 1996 and
1995 totaled 43,750 and 575,583 shares, respectively. The unexercised options
expire in July 1997.
In December 1994, options to purchase 250,000 shares of the Company's stock for
$0.828 per share were granted to certain employees and officers of the Company.
None of these options were exercised during fiscal years 1996 or 1995. The
options expire in December 1997.
In July 1995, options to purchase 405,000 shares of the Company's common stock
for $0.5625 per share were authorized. Of these shares, 305,000 were granted and
issued to certain employees, officers, and related parties of the Company. The
remaining 100,000 shares authorized but not issued will be used by the Company
as part of an employment package to future employee(s). None of these options
were exercised during fiscal 1996. The options expire in July 1998.
22
<PAGE> 23
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS, COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
The following table sets forth the names, ages and current positions
with the Company held by Directors, Executive Officers and Significant Employees
as of March 31, 1996, together with the year such positions were assumed. There
is no immediate family relationship between or among any of the Directors,
Executive Officers or Significant Employees, other than Jerome L. Kaminshine,
the Executive Vice President of ESECO, is the son of Arthur A. Kaminshine. The
Company is not aware of any arrangement or understanding between any Director or
Executive Officer and any other person pursuant to which he was elected to his
current position.
<TABLE>
<CAPTION>
Position
Name Age Position Since
- ------------------------ ------ ----------------------- ---------
<S> <C> <C> <C>
Arthur A. Kaminshine 72 President/Director 1994
Edward L. Handlin 57 Secretary/Director 1994
</TABLE>
Arthur A. Kaminshine, age 72, was elected a Director and President of
International Imaging, Inc. in July 1994. Prior to its merger with the Company,
Mr. Kaminshine had been President and a Director of ESECO since 1964. Mr.
Kaminshine attended Southwestern State University in Weatherford, Oklahoma. Mr.
Kaminshine continues to be the President of ESECO, IMGI's principal subsidiary.
Edward L. Handlin, age 57, was elected a Director and Secretary of
International Imaging, Inc. in July 1994. Prior to its merger with the Company,
Mr. Handlin was the Chief Financial Officer of ESECO. Mr. Handlin has a B.S.
degree from the University of California, Berkeley, California and an M.B.A.
degree from the University of Chicago. Mr. Handlin has also been a practicing
Certified Public Accountant in the State of Oklahoma for the last thirteen
years.
No Forms 3 or 4 were filed or required to be filed during the most
recent fiscal year.
ITEM 10. EXECUTIVE COMPENSATION
For services rendered to the Company during the fiscal year ended March
31, 1996, no executive officers received cash compensation in excess of
$120,000. The following table sets forth information concerning all annual cash
compensation paid to the chief executive officer of the Company for services
rendered to the Company during the twelve month period ended March 31, 1996.
NAME OF INDIVIDUAL CAPACITY CASH
OR NUMBER IN GROUP SERVED COMPENSATION
- ------------------ -------- ------------
Arthur A. Kaminshine President & Chief $77,755
Executive Officer
In addition, the Company makes available certain non-monetary benefits
to its executive officers with a view to acquiring and retaining qualified
personnel and facilitating job performance. The Company considers such benefits
to be ordinary and incidental business costs and expenses. The value of such
benefits did not exceed, in the case of any named individual, 10% of the cash
compensation of the individual. Finally, the Company's ESECO's subsidiary is
continuing to make deferred compensation payments to a retired officer of ESECO
at the rate of $1,667 per month, as discussed in Note 8 to the Company's
Financial Statements in Item 7 herein.
23
<PAGE> 24
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of March 31, 1996,
concerning shares of Common Stock of the Company beneficially owned by persons
who own more than 5% of the Company's common stock, each director and officer
and by all directors and officers as a group. Unless expressly indicated
otherwise, each stockholder exercises sole voting and investment power with
respect to the shares beneficially owned.
Name and address Number of Shares Percent
of Beneficial Owner Beneficially Owned of Class
- ------------------- ------------------ --------
Arthur A. Kaminshine
P. O. Box 1505
Cushing, OK 74023 362,143 7.65%
Edward L. Handlin
P. O. Box 84
Chandler, OK 74834 17,913 (1)
(1) Beneficial ownership of less than one percent (1%)
(2) Number of outstanding shares used to calculate percentage computed as
described in the preceding paragraph: 4,733,416
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following sets forth information regarding transactions between the
Company and the following persons: directors, officers and persons who, under
certain assumptions set forth in the previous Item 11, potentially own in excess
of 5% of the Company's Common Stock:
A series of relatively small loans made by the President, Mr.
Kaminshine to ESECO prior to and after its merger with the Company. Only a total
of $54,467 remains to be repaid by the Company to Mr. Kaminshine at March 31,
1996.
The Company granted warrants to purchase 2,050,500 shares to Mr.
Kaminshine in exchange for his personal guarantee of the Company's bank lines of
credit as discussed in Footnote 12 to the Consolidated Financial Statements. As
part of this agreement all of the voting stock of ESECO was placed in escrow for
the life of these guarantees (See Footnote 6 to the Consolidated Financial
Statements).
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K AND 8-K/A
(a) EXHIBITS
(1) SEE SEC EXHIBIT NO. 23, CONSENTS OF EXPERTS AND COUNSEL, ON PAGE
26.
(b) REPORTS ON FORM 8-K
The Company filed no reports during the fourth quarter of the fiscal
year ended March 31, 1996.
24
<PAGE> 25
SIGNATURES
Pursuant to the regulations of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
INTERNATIONAL IMAGING, INC.
Date: October 31, 1996 /s/ Arthur A. Kaminshine
------------------------
Arthur A. Kaminshine
President
Date: October 31, 1996 /s/ Edward L. Handlin
---------------------
Edward L. Handlin
Chief Financial Officer
25
<PAGE> 1
EXHIBIT NO. 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report dated May 17, 1996, included in this Form 10-KSB/A, into the Company's
previously filed Registration Statement of Form S-8 filed August 3, 1994.
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma
October 31, 1996
25
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
CONSOLIDATED FINANCIAL STATEMENTS OF INTERNATIONAL IMAGING, INC. FOR THE FISCAL
YEAR ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
(B) FORM 10-KSB FOR THE FISCAL YEAR ENDED MARCH 31, 1996
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 12,790
<SECURITIES> 18,191
<RECEIVABLES> 563,224
<ALLOWANCES> 73,404
<INVENTORY> 1,608,226
<CURRENT-ASSETS> 2,148,230
<PP&E> 1,197,109
<DEPRECIATION> 651,335
<TOTAL-ASSETS> 2,705,328
<CURRENT-LIABILITIES> 1,085,480
<BONDS> 1,092,624
0
0
<COMMON> 4,733,416
<OTHER-SE> 521,544
<TOTAL-LIABILITY-AND-EQUITY> 2,705,328
<SALES> 3,557,627
<TOTAL-REVENUES> 3,557,627
<CGS> 2,684,356
<TOTAL-COSTS> 2,684,356
<OTHER-EXPENSES> 1,537,979
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 90,141
<INCOME-PRETAX> (746,289)
<INCOME-TAX> 0
<INCOME-CONTINUING> (746,289)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (746,289)
<EPS-PRIMARY> (0.16)
<EPS-DILUTED> (0.16)
</TABLE>
